BTP Bond Ladder: How to Build a Maturity Ladder for Steady Fixed Income

One hundred thousand euros, zero appetite for risk

Roberto is sixty-three, has just retired, and holds 100,000 euros in a term deposit account that is about to mature. He does not want equities: this stage of his life is about drawing income, not growing capital further. But he also wants something better than simply rolling the deposit over again, leaving him at the mercy of whatever rate the bank decides to offer in twelve months.

The solution he arrives at, after talking to an independent adviser, is simpler than he expected: build a ladder of Italian government bonds (BTPs) with maturities staggered across ten years, so that one tranche matures every year and frees up cash, while the rest of the capital keeps earning coupons at a rate already locked in today. No surprises, no forced sales, and a 12.5% tax rate instead of 26%.

What a bond ladder is

A bond ladder is a set of bonds with staggered maturities, structured so that one tranche comes due at regular intervals, typically every year. Instead of putting all the capital into a single bond with a single maturity date, the investor splits it into equal portions, each allocated to a bond maturing in a different year.

The mechanism produces two practical effects. First, regular liquidity: a portion of the capital becomes available every year without having to sell anything on the secondary market. Second, a locked-in average yield over a long horizon: each tranche pays the coupon fixed at the time of purchase, regardless of how rates move afterward.

For someone in the drawdown phase of retirement, or simply anyone who wants predictable income without equity exposure, the ladder solves a problem that neither a single bond nor a term deposit solves as well: the former ties all the capital to one date, the latter exposes the entire amount to whatever rate the bank offers at renewal.

Why BTPs are the natural building block

For an investor holding assets in Italy, government bonds are close to the obvious choice for this kind of ladder, for three concrete reasons.

Favourable taxation. Coupons and capital gains on BTPs, and on equivalent “white list” bonds from other EU states and supranational issuers, are taxed at 12.5%, against the 26% applied to term deposits and corporate bonds. Over a ten-year horizon, this gap is not a footnote: it is the main difference between two instruments with the same gross yield.

Zero credit risk if held to maturity. An investor who buys a BTP and holds it to redemption receives the face value regardless of how the market price moves in between. There is no lower credit risk available to an Italian-based investor than that of the state issuing its own reference currency within the eurozone.

Market liquidity and transparency. BTPs trade on the MOT (the electronic bond market of Borsa Italiana), with public prices, tight spreads on the more liquid maturities, and the option to sell before maturity, if needed, at an observable real-time market price.

A corporate bond or a term deposit might, in theory, offer a higher gross rate. But after the 26% tax, that advantage nearly always shrinks, and in many cases reverses in favour of the BTP, as the comparison below shows.

Building a ten-year ladder, step by step

The process is mechanical, and that is part of its value: once set up, the ladder requires very little maintenance.

1. Define the horizon and the number of rungs. For a retiree with a ten-year income need, the natural choice is ten tranches, one for each maturity from 1 to 10 years. Anyone with a shorter horizon can build a 5- or 7-year ladder on the same principle.

2. Split the capital into equal parts. On 100,000 euros and ten rungs, 10,000 euros of face value goes to each maturity. Equal allocation simplifies management and spreads reinvestment risk evenly over time.

3. Select the available BTPs for each maturity. Borsa Italiana typically lists BTPs maturing at 1, 2, 3, 5, 7, and 10 years, alongside bonds with intermediate maturities issued in earlier years and still trading. For maturities not covered by a precise new issue, the closest existing bond to the target date is used.

4. Buy through the MOT. Purchases go through your broker or bank, with a typical minimum lot of 1,000 euros of face value. The purchase price includes accrued interest since the last coupon, which is returned to you at the next coupon payment.

5. When the first tranche matures, reinvest into a new ten-year position. As the 1-year tranche matures, the freed capital gets reinvested in a new 10-year BTP, rebuilding the ladder. Alternatively, if the capital is needed for current spending (the drawdown case), it is simply collected and not reinvested: the ladder shortens by one year each time, until it winds down.

Once running, the result is a coupon stream distributed across all maturities plus a capital repayment every year, with the ladder’s average yield locked in at the rates prevailing when each rung was purchased.

Reinvestment risk versus duration risk

The ladder does not eliminate risk; it transforms it. It is worth being precise about what is gained and what is given up compared with the alternatives.

Duration risk eliminated. An investor who holds each BTP to maturity takes no loss from the price swings driven by interest rate movements. Rising market rates push down the price of a long-dated bond, but that does not affect someone with no intention of selling before redemption.

Reinvestment risk accepted. Every time a tranche matures, the freed capital must be reinvested at the rates prevailing at that moment, which may be lower or higher than the rates locked on the other rungs. A ladder spreads this risk across several years instead of concentrating it on a single date, but it does not eliminate it: if rates fall structurally over a decade, the ladder’s average yield falls with them, year after year.

An aggregate bond ETF works the opposite way: no explicit reinvestment risk (the fund manages it internally, continuously), but permanent exposure to duration risk, because the ETF’s value moves every day with market rates and there is no redemption date to fall back on.

Practical execution: the MOT, minimum lot size, accrued interest

Buying BTPs to build a ladder is a routine operation for anyone with a securities account at an Italian bank or broker.

Where to buy. On the primary market, at auction, for investors who want the issue price and are willing to wait for the Ministry of Economy and Finance’s placement windows; or on the secondary market (MOT), where already-issued bonds trade daily at an observable real-time price, letting you pick exactly the maturity you want without waiting for a new issue.

Minimum lot. Typically 1,000 euros of face value, though some issues carry different minimums: it is always worth checking the specific terms of the chosen bond before placing an order.

Accrued interest. An investor buying a BTP between two coupon dates pays the seller the interest accrued since the last payment, an amount automatically refunded at the next coupon. This is not an extra cost: it is simply the portion of interest already earned that belongs to whoever held the bond up to that point.

Fees. Trading fees on the MOT vary by broker, generally somewhere between a small fixed amount and a minimal percentage of the transaction value. On a ladder built once, with ten purchase transactions, the overall impact on yield is marginal.

The comparison: 100,000 euros over ten years

To see what the ladder is really worth, it helps to compare it against the two most common alternatives for a retiree seeking stable income: rolling a term deposit and an aggregate bond ETF.

Assumptions, representative of Italian market conditions in the second half of 2026:

• BTP ladder: ten tranches from 1 to 10 years, gross yields rising from 2.70% (1 year) to 3.85% (10 years), equal-weighted average gross yield 3.35%
• Term deposit: rolled every 24 months at an estimated average rate of 3.00% gross
• Aggregate bond ETF: gross YTM 3.60%, TER 0.10%, net-of-TER gross yield 3.50%

$$r_{ladder,,net} = 3.35% \times (1 - 0.125) \approx 2.93%$$

$$r_{deposit,,net} = 3.00% \times (1 - 0.26) \approx 2.22%$$

* The Italian government component within the ETF’s portfolio partially benefits from the 12.5% rate, but on a globally diversified bond fund this share stays marginal relative to the total.

** The ETF’s yield is not a contractual cash flow: capturing it requires selling units, exposing the investor to the market price on the day of the sale, not a guaranteed redemption value.

Three points stand out. The BTP ladder beats the term deposit by roughly 700 euros a year on 100,000 euros, largely thanks to the 12.5% tax advantage. The aggregate bond ETF offers a theoretically higher net yield than the ladder, but with a substantial caveat: that yield depends on the market price on whichever day units are sold, while the BTP ladder, if each tranche is held to maturity, guarantees the exact amount agreed at purchase. For anyone prioritising predictability over the highest marginal yield, that difference matters more than the 0.34 percentage-point gap.

Mistakes to avoid

Building the entire ladder in a single batch of orders on one day, without checking prices. Bonds on the MOT have continuously updated prices: it is worth checking the bid-ask spread before each order, especially on less liquid maturities.

Forgetting the stamp duty. Like any security held in a custody account, the ladder is subject to the 0.20% annual stamp duty (imposta di bollo) on the total portfolio value, not just on the coupons received. This needs to be included when calculating the overall net yield.

Selling a tranche before maturity for an unforeseen need. Doing so exposes that single tranche to exactly the price risk the ladder as a whole is built to avoid. For this reason, a ladder works best alongside a separate liquidity reserve for emergencies, so a rung never has to be dismantled early.

Concentrating the ladder in illiquid bonds for a fraction of a percentage point of extra yield. An off-the-run BTP with a maturity close to the target date but traded infrequently can carry a wider buy-side spread, eroding the small apparent yield advantage.

How Wallible helps track the ladder

Once built, a BTP ladder requires little active management, but it helps to see the weighted average yield of the whole bond block at a glance, alongside the rest of the portfolio. Wallible lets you load the ladder’s composition next to your other positions and see how it contributes to expected return and overall risk, particularly useful for anyone planning the drawdown phase of retirement who wants to know how much of their annual income need is already covered by contractual bond cash flows versus how much still depends on the remaining equity component.

Next step

A BTP ladder is not a sophisticated strategy: it is a mechanical, disciplined way to turn a lump sum into predictable income, with the tax advantage of Italian government bonds and without the credit risk that weighs on other fixed-income instruments.

With Wallible you can:

• Analyse your portfolio and see how the bond component, including a BTP ladder, contributes to expected return and overall risk
• Compare term deposits, BTPs, and bond ETFs in the guide to Italian fixed income options
• Read about the next phase in portfolio decumulation in retirement to see how the ladder fits alongside the remaining equity allocation